Opportunity Amid Cannabis Banking Hurdles

Investors seeking opportunities in the cannabis market may want to turn their attention toward companies offering solutions for a situation that could otherwise slow the industry's growth. A number of emerging firms are providing or pursuing payment options that can help cannabis companies sidestep the roadblock created by the lack of access to traditional banking services. Among the companies honing financing, payment processing and other business development services for the cannabis industry are Global Payout, Inc (OTC: GOHE) (GOHE Profile), MassRoots Retail (OTC: MSRT), iAnthus Capital Holdings, Inc. (CSE: IAN) (OTC: ITHUF), and Glance Technologies, Inc. (OTC: GLNNF) (CSE: GET). Meanwhile, recent action at Canopy Growth Corp. (TSX: WEED) demonstrates that a change in bank industry policy could be on the horizon.

In Arizona, the state Department of Health Services reported that its dispensaries sold over 43 tons of medical marijuana through year-end 2017, an increase of 48 percent from 2016. Capitol Media Services estimates the quantity of medical marijuana sold in Arizona in 2017 represented approximately $275 million in retail sales for the year. Sales in the United States as a whole represent a multibillion dollar market that is only expected to grow as the legalization process continues to spread. In Canada alone, taking into account the planned July 2018 legalization of recreational cannabis, sales of the product are expected to reach C$6 billion by 2021.

Despite the massive sales figures, cannabis companies largely conduct business in cash. With marijuana classified as a Schedule 1 drug at the federal level in the United States, the cannabis industry is essentially unbankable there, creating an opportunity for companies that can help industry participants process the payments generated by cannabis sales.

The Struggle to Organize Necessary Elements of Infrastructure

For the time being, cannabis businesses continue to struggle with financing issues related to customer receipts and budget expenditures, especially in the United States. While U.S. banks have overwhelmingly refrained from doing business with cannabis companies due to the federal prohibition on sales of the product, in Canada some banks have begun to offer business accounts to cannabis companies. Even when Canada does begin legalization in mid-2018, however, there's no guarantee its banks will be quick to finance cannabis companies. The year is expected to be a landmark period for cannabis-related businesses, yet there's still a fair amount of uncertainty about how they will fare. Global Payout, Inc. (OTC: GOHE) is one company positioned to help alleviate that uncertainty through a number of payment processing services.

Payment Solutions for the "Unbankable"

Global Payout's fintech payment solutions can be fully customized for virtually any domestic and international organization distributing money worldwide. Through its MoneyTrac Technology ("MTRAC") subsidiary, Global Payout is focused on helping reduce the extensive security, accounting and overhead costs dispensaries face from having to deal exclusively in cash. The reliance on cash transactions by cannabis businesses leaves these companies vulnerable to theft and facing all the inconvenience associated with running a cash-only business. And the problem is only expected to grow more acute as the rapidly growing multibillion-dollar industry continues to expand, with cannabis now recreationally available in eight states.

Addressing this opportunity in the company's letter to shareholders, Global Payout CEO James Hancock stated: "Recognizing the gap between adequate financial technology solutions and the rapidly expanding, multi-billion-dollar cannabis industry, a collective decision was made in March to spinout our majority owned subsidiary, MoneyTrac Technology to begin serving the underserved businesses of the cannabis industry. … These partnerships, combined with several other important developments throughout the year, have effectively positioned MoneyTrac to generate revenue and become a recognized leader of a variety of service and solution offerings within the cannabis industry."

MTRAC plans to launch its regulatory compliant token offering in the first quarter of 2018 as part of an effective, decentralized system for processing payments (http://cnw.fm/eoPQ3). The M-Token from MTRAC will allow vulnerable businesses to migrate from a cash-only business model by offering the basic yet essential services denied to them by the traditional banking industry. In the process, the businesses can improve their security and boost their operational efficiency.

Vanessa Luna, CEO of MTRAC, stated, "MoneyTrac's primary objective has been, and will continue to be, to serve the legitimate and profitable businesses of the cannabis industry by effectively addressing the financial technology and banking challenges they are faced with. … Our regulatory compliant Token Offering will revolutionize how these businesses operate and help MTRAC further its objectives for identifying various partnerships and cultivating the relationships necessary to pave the way for alternative banking solutions."

Cannabis Compliance

To help it develop a strong foundation for the delivery of banking solutions to the legal cannabis industry, MTRAC recently signed a joint-venture agreement with Integrated Compliance Solutions, LLC ("ICS"), a leading provider of financial regulatory compliance services and solutions to the retail cannabis industry. The partnership bolsters MTRAC's ability to provide compliant banking solutions with its strategic partners.

In the press release announcing the agreement, Luna emphasized the importance in maintaining compliance in the heavily regulated retail cannabis industry.

"The ICS team carries several years of valuable experience with them in the field of regulatory compliance solutions and financial technology services for banking, and their integration into the banking solutions (that) we are dedicated to delivering to the cannabis industry is not only significant, but essential to our commitment of providing retail cannabis businesses with the most compliant and regulated banking solution available," she stated (http://cnw.fm/xiq7H).

Exploring Expanded Marketing Opportunities

Global Payout also recently signed a Sales Partnership Agreement with Eyeconic.tv in a move to explore the potential of creating new revenue streams (http://cnw.fm/vnXs7) while boosting the impact of both parties.

The companies plan to leverage the network of dispensaries and industry-specific brands and products established through MTRAC's PotSaver publication in conjunction with Eyeconic.tv's digital media platform. Eyeconic.tv is an innovative producer and distributor of interactive digital mediums focused mainly on digital menus, advertising and kiosks to customers on their business premises. PotSaver is a revenue-producing community periodical and online advertising platform that provides listings for discounted cannabis-related products to local dispensaries and shops.

"Establishing this sales partnership with Eyeconic.tv is an incredibly effective way to deliver more value to the solutions and services we are providing to cannabis-related businesses. The Eyeconic.tv team are true pioneers in the digital marketing and advertisement space and have established themselves as the premier provider of these services throughout the cannabis industry. I am pleased they recognize the value we can bring to their brand through the network of dispensaries we have created through our PotSaver publication, as well as through the invaluable expertise our team offers in developing and implementing successful sales and marketing strategies. I am extremely confident that this will be a partnership that is mutually beneficial to the objectives of each of our companies," Luna said.

Additional Cannabis Payment Solution-Related Opportunities

In a sign that Canadian banks are beginning to change their position about financing cannabis firms, Canopy Growth Corp (TSX: WEED), a diversified Canadian cannabis company that offers curated cannabis in dried, oil and capsule form, has recently announced a $175 million bought stock offering led by two major Canadian investment banks - Bank of Montreal, through its BMO Capital Markets division, and GMP Securities. Canopy Growth operates on four continents where it sells cannabis products, conducts R&D, and provides cannabis-related education for healthcare practitioners.

While Canadian banks may be beginning to change their stance on financing cannabis firms, it should be noted there are no signs of such a thaw to the south where banks continue to avoid doing business with cannabis firms because of federal regulations. Canopy Growth's extensive operations outside of Canada mean that the firm can still benefit from payment solutions that enable it to reduce the amount of cash transactions it conducts.

MassRoots (OTCQB: MSRT) offers one of the most popular technology platforms for the regulated cannabis industry. The company's mobile apps, with more than a million users, enable consumers to draw on community-sourced reviews to make educated cannabis purchasing decisions. The company offers a compliance and point-of-sale system called MassRoots Retail, which helps cannabis businesses conduct retail operations more efficiently and manage compliance reporting as required by state regulators. MassRoots has recently formed a blockchain subsidiary focused on developing solutions for the cannabis industry based on the blockchain. The company believes that making use of the transparent digital ledger that constitutes the blockchain can help the cannabis industry operate with greater efficiency, accountability and transparency.

iAnthus Capital Holdings (CSE: IAN) (OTCQB: ITHUF) offers investors exposure to licensed cannabis cultivators, processors and dispensaries located across the United States. The company offers capital as well as hands-on operational and management expertise. With seven investments in six states covering an addressable market of approximately 50 million people, the company's dispensaries stand to benefit from access to innovative payment processing and financial solutions that enable them to more efficiently handle transactions.

Glance Technologies, Inc. (OTCQB: GLNNF) (CSE: GET) owns Glance Pay, a mobile payment system transforming the way smartphone users interact with merchants and buy products. The company's partially owned subsidiary, Cannapay Financial, is the vehicle for Glance Technologies' entry into the cannabis industry through licensing agreements that leverage the Glance Pay App and the Glance Merchant App's data analytics. Cannapay Financial has two apps in development - Cannapay, a mobile-to-mobile payment system for the marijuana industry, and SuperDope Delivery, a mobile ordering and delivery app for cannabis consumers.

The tremendous growth being experienced by the cannabis industry, coupled with the difficulty cannabis businesses are experiencing in accessing banking services, especially in the United States, have created significant opportunities for firms that can offer these businesses effective methods of processing transactions. Each of the companies listed above is positioned to benefit from this evolving trend, making them worthy of further investigation by investors looking to capitalize on the expansion of the cannabis industry and the corresponding development of payment solutions to facilitate that expansion.

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